WASHINGTON — A year after the demise of legendary Wall Street investment bank Lehman Bros., calls for far-reaching reforms to rein in the financial industry's excesses remain unanswered -- and may be stymied by increasing signs of a budding economic recovery.
President Obama is headed today to Founders Hall on Wall Street, steps from the heart of the business world, to try to reignite support for his proposed overhaul of financial regulations.
The legislation would permanently expand Washington's role in overseeing the financial system by creating a new agency to protect consumers, reining in the dark world of derivatives and giving government officials the ability to seize and dismantle large companies whose failures could be catastrophic.
The momentum for those reforms has been weakening recently as banks begin to repay their bailout money, the stock market climbs out of its deep hole and a less-chastened financial industry fights back against the specter of stricter government regulation.
So on the anniversary of Lehman's collapse, Obama will try to seize back the high ground. He will deliver a major speech that will highlight his administration's efforts to halt the financial crisis and press Congress to approve changes that he believes are needed to prevent a repeat, the White House said.
"We have to have much stronger rules of the game in place with much stronger constraints on how much risk can take place," Treasury Secretary Timothy F. Geithner said last week during a town hall forum hosted by CNBC. "People are so angry. . . . We can't let things go back to the way they were."
No matter how deep the crisis, however, history shows that fear eventually subsides, greed returns and new market bubbles emerge, financial historian Robert E. Wright said.
"It's amazing how short Wall Street's memory is -- and investors' memory is," said Wright, a professor at Augustana College in South Dakota who is writing a book titled "Bailouts: Private Profits, Public Risk."
A year ago, a $700-billion bailout fund didn't exist, taxpayer money wasn't invested in banks or automakers, and the federal government didn't loom powerfully over the entire economy.
But Lehman's collapse Sept. 14, after it failed to win a government lifeline, triggered a chain reaction of events that rattled capitalism to its core. During the chaotic days that followed, the government began launching the largest set of economic rescue initiatives since the Great Depression to avoid a meltdown of the global financial system.
